Mainland China Put Warrants Bubbles Influence Factors Of Research

In August2005, the China Securities Regulatory Commission restarted the warrants market and intruduced several warrants to the security market, in order to open China’s financial derivatives market which was the first step to provide more investment tools to the Chinese stock market. To some extent, the stock warrants is considered to be similar to stock options issued by listed companies as an investment tool, it enlarges the area of investment vehicles and expanse of the entire financial market.For the warrants market in China mainland, the gap between theoretical price and market one of the warrants is quite large, even the creation by eligible securities companies could not make the market price converge to the theoretical price effectively. The part that market price of the assets exceeds their theoretical price is considered as bubble, so the part that warrants market price exceeds its theoretical price is the warrants bubble. Therefore, the object of this paper is the bubble of the put warrants bubble, this paper attempts to measure the put warrants bubble, and do empirical analysis of several factors that may affect put warrants bubble. Also. I have provided several feasible suggestions for the policy makers which will help China’s warrants market run more effectively.I selected all the warrants since2005as an object and calculated their theoretical price in each trading day. From the descriptive statistical analysis of the whole warrants market, we can see that the daily trading volume and turnover are very high, indicating extremely active transactions in the market.I selected the put warrants as sample and identify the absolute value and relative value of the put warrant.Then, I did empirical analysis of put warrants bubble,both absolute and relative one. I selected panal data of liquidity, market price volatility, life cycle, outstanding of the whole warrants market, and the creation by brokerage as explanatory variable, and established multi-panel regression models. The result showed that:absolute and relative bubble value of put warrants both positively correlated with liquidity and market price volatility significantly, while negatively correlated with life cycle and whole market outstanding significantly. Particularly, the creation mechanisms significantly reduced the absolute bubble value, but did not affect the relative one. Finally, according to the results of empirical research, I have provided several feasible suggestions for the policy makers which will help inhibit the formation of warrants bubble or reduce the extent of bubble, which could help China’s warrants market run more rationally and effectively.